Posts Tagged ‘faith’

This is the promised second letter to the editor from today’s Financial Times. A reader from Berlin responds – beautifully – to Anjana Ahuja’s December 7th column “Echoes of Galileo in the populist retreat from reason”.

Sir, ….

Galileo Galilei actually spent his house arrest rather comfortably in one of the residences of the Medici family in Rome and later returned to his villa south of Florence to continue his work. If he had been “forbidden to propagate his beliefs”, as claimed in the piece, he would hardly have been able to finish the most famous of his works, Discorsi, which was published in Italian five years after the trial. What was demanded from Galileo in this famous trial, was not to revoke his claim that the sun and not the earth is the centre of the universe, as often claimed, in fact he was asked by Pope Urban VII (whose protégé he was!) to phrase his claims as a proposition only. Galileo rather haughtily insisted them to be a certainty. In contrast, the Pope acted with diligence, as scientific findings very rarely can be called certainties and generally only have value until improved or overturned by later generations. As it turns out, both were wrong, the Church and Galileo, as neither the Earth nor our sun are the centre of the universe.

The Galileo example is ill suited to illustrate the myth of a church hostile to science. For hundreds of years monasteries were the only centres of learning far and wide. ….

Were it not for devout Christians such as Grosseteste, Bacon, Albertus Magnus, to name just a few, Europe and America would never have become places where the sciences thrived and still strive like nowhere else in the world. Luther even held the view that our restless desire to get to the bottom of things is inherent in Christian mentality ….

The conflict between scientists and political leaders (secular and religious) in some countries is moving toward levels that were common centuries ago, writes British-Indian science journalist Anjana Ahuja. The coming change of government in the USA is but one example, though a surprising one.

Four centuries ago, Galileo caught the unwelcome attention of the Roman Catholic Church. In 1616, his conviction that the Earth went round the Sun, contrary to the geocentric view of the universe, simply irritated theologians; by 1633, the astronomer was under house arrest and forbidden from propagating his beliefs, a situation that prevailed until his death in 1642. It might have been worse for a heretic: he could have been burnt at the stake.

Scientists may well feel the heat from those in power once again. Donald Trump, US president-elect, established his anti-science credentials by declaring climate change a Chinese hoax. In Mike Pence, he chose a running mate who seems not to believe in evolution. One science blogger said Mr Trump’s cabinet looked as if his team had “made a list of all 300m Americans, ordered them by competency … and then skipped straight down to the bottom”.

Anjana Ahuja has a PhD in space physics from Imperial College London, and is now a contributing writer at the Financial Times. She is also a visiting lecturer in science journalism at City University in London.

One of my pet peeves is conservatives and libertarians who claim to adore liberal philosopher Adam Smith (1723-1790), so reveal a complete failure to understand his writings. New York Times journalist David Leonhardt expresses the same complaint.

He believed that government had a crucial role to play in a well-functioning economy. It should finance and run good schools, as well as build roads, bridges and parks, he argued. It should tax alcohol, sugar and tobacco, all of which impose costs on society. It should regulate businesses to protect workers. And it should tax the rich — who suffer from “indolence and vanity” — to help the poor.

Which leftist economist was this? None other than Adam Smith, the inventor of the “invisible hand” and the icon of laissez-faire economics today. Smith’s modern reputation is a caricature. …. He certainly believed that a market economy was a powerful force for good. …. Yet he did not have a religious faith in the market. Smith was a classical liberal, in the European sense of the word, who emphasized the essential equality among human beings.

Long ago, during the presidency of George W. Bush, American satirist Stephen Colbert coined the term ‘truthiness’. In an FT column this week, British economist John Kay looks back on the evolution of truthiness, and the role it plays in political debate on both sides of the Atlantic.

We are all subject to confirmation bias — a tendency to find, or interpret, facts to support opinions we already hold. But truthiness takes us further. Mr Colbert has described it as truth that “comes from the gut”. There is a profound egoism about truthiness: these are beliefs we hold not because they look true to me, but because they look true to me. A statement is truthy if it is held valid independently of any evidence. Truthiness is the belief that comes when conviction is prized over information. ….

In his fine book Enlightenment 2.0, philosopher Joseph Heath notes an effusion from former (and prospective) presidential candidate Rick Santorum. The Republican described how in the Netherlands elderly patients are “euthanised involuntarily” and its fearful residents seek medical treatment abroad. Mr Heath observes that Mr Santorum “seemed not to realise that the Netherlands was a real place, where people might hear what he said, and hope to set the record straight”. But Mr Santorum was unmoved; a spokesperson explained to a Dutch reporter, without retraction or apology, that the former senator “says what’s in his heart”.

Readers of this blog might recall that the TdJ “economics as faith” series — for example, here — provides examples of ‘truthy’ thinking by economists. By ‘faith’, I was referring to any strong conviction, not necessarily religious faith. Perhaps “economics as truthiness” would be a better title for the series. Some of the examples, however, are tautologies, so true by definition.

Oxford University economist Simon Wren-Lewis writes on his blog that balanced-budget fundamentalism – the belief that government budgets must be balanced, regardless of the state of the economy – is stronger in Europe than it is in the United States. This should worry Europeans because “fundamentalism … that denies the principles of macroeconomics … is doing people immediate harm”.

Europeans, and particularly the European elite, find popular attitudes to science among many across the Atlantic both amusing and distressing. In Europe we do not have regular attempts to replace evolution with ‘intelligent design’ on school curriculums. Climate change denial is not mainstream politics in Europe as it is in the US (with the possible exception of the UK). Yet Europe, and particularly its governing elite, seems gripped by a belief that is as unscientific and more immediately dangerous. It is a belief that fiscal policy should be tightened in a liquidity trap. ….

There is now almost universal agreement among economists that tightening fiscal policy tends to significantly reduce output and increase unemployment when interest rates are at their lower bound: the debate is by how much. ….

They still teach Keynesian economics in Europe, so it is not as if the science is not taught. …..

So why does ‘balanced-budget fundamentalism’ appear to be more dominant in Europe than the US. …. I suspect a big factor is just recent experience.

The US never had a debt funding crisis. The ‘bond vigilantes’ never turned up. In the Eurozone they did, and that had a scarring effect on European policymakers that large sections of the policy advice community can play to, and which leaves those who might oppose austerity powerless. That is not meant to excuse the motives of those that foster a belief in balanced budget fundamentalism …. The difference between fundamentalism that denies the concept of evolution and fundamentalism that denies the principles of macroeconomics is that the latter is doing people immediate harm.

So how did macroeconomics arrive at its current state? The answer might provide a lead as to where it ought to go. …. What emerged was not a good idea. The preferred model has a single representative consumer optimizing over infinite time with perfect foresight or rational expectations, in an environment that realizes the resulting plans more or less flawlessly through perfectly competitive forward-looking markets for goods and labor, and perfectly flexible prices and wages.

How could anyone expect a sensible short-to-medium-run macroeconomics to come out of that set-up? …. A model that rules out pathologies by definition is unlikely to help. It is always possible to claim that those “pathologies” are delusions, and the economy is merely adjusting optimally to some exogenous shock. But why should reasonable people accept this? ….

When I was in advanced middle age, I suddenly woke up to the fact that my colleagues in macroeconomics, the ones I most admired, thought that the fundamental problem of macro theory was to understand how nominal events could have real consequences. This is just a way of stating some puzzle or puzzles about the sources for sticky wages and prices. This struck me as peculiar in two ways.

First of all, when I was even younger, nobody thought this was a puzzle. You only had to look around you to stumble on a hundred different reasons why various prices and factor prices should be much less than perfectly flexible. ….

The second peculiarity was that the path from nominal events to real consequences was not my idea of the fundamental problem of macro theory anyway. All along, I had been thinking … that the main problem was to understand why real shocks that took the economy out of some satisfactory equilibrium led to such a prolonged and sometimes unsatisfactory adjustment. …..

Robert Solow (born 1924) has a remarkable sense of humour.Here is one of my favourite quotes from him: “Everything reminds Milton Friedman of the money supply. Everything reminds me of sex, but I try to keep it out of my papers.”

I have long wondered why a brilliant economist like Arnold Kling, who has a PhD from prestigious MIT, never worked in academia. Now I understand. He was a heretic who lacked faith in the doctrine of rational expectations.

I remember reading once that it is still not understood how the giraffe manages to pump an adequate blood supply all the way up to its head; but it is hard to imagine that anyone would therefore conclude that giraffes do not have long necks. At least not anyone who had ever been to a zoo.

–Robert M. Solow

Think of the task of macroeconomics as completing a mineshaft between the “outside” (what we observe in the world) and the “inside” (a mathematical model that is “pure” in its microfoundations). The Old Keynesians, including Solow, took an outside-in approach: let’s work from what we observe, build a crude model to handle that, and maybe eventually we can dig deeper and find the microfoundations. Start from the fact that there is a giraffe, and try to figure out how it maintains its blood supply. Do not start from a model of blood supply that precludes the existence of giraffes. ….

I chose Solow as my dissertation adviser, and I wrote an outside-in thesis, working backwards from what we observe to a theory of price rigidity. Not having a thesis that focused on rational expectations and not having Fischer plugging for me were career-altering. I was doomed to failure if I tried academia, and so I wound up on a different track. I don’t think I was the one who lost out on that deal. …. [emphasis added]

I still despise inside-out macro, and I still prefer the outside-in approach. ….

I still respect the Old Keynesian approach of starting with observations about the world rather than starting at the bottom of the mine with a “pure” model. However, I am willing to entertain theories that differ considerably from the Old Keynesian one.

It could have been worse. Mr Kling was at least able to complete his PhD at MIT. With PhD in hand, he could easily have landed a tenured position at a second- or third-tier teaching university. For whatever reason – perhaps desire for independence or love of research – he did not choose that path.

Arnold Kling (born 1954) graduated from Swarthmore College in 1975 and received a Ph.D. in economics from MIT in 1980. He now teaches statistics and economics in the Upper School of the Berman Hebrew Academy in Rockville, Maryland.

Stanley Fischer (born 1943) is Vice-Chairman of the US Federal Reserve System. Previously (2005-2013) he served as governor of the Bank of Israel. He was a professor at the MIT Department of Economics from 1977 to 1988.

Economists are not always wrong; nor does the real problem lie with dodgy data. The mistake comes when policy makers invest the findings of a faith-based discipline with the certainties of science. They would do better to rely on common sense and observed behaviour.

FT columnist Philip Stephens is commenting on controversy surrounding errors found in the work of Harvard professors Carmen Reinhart and Kenneth Rogoff. His statement is interesting, even though the second sentence contains an error. Certainties are characteristic of faith, not science. Faith-based statements by definition cannot be proven wrong. The conventional wisdom of science can always be overturned with new data, or new ways of examining old data.

Reinhart and Rogoff, in a NY Times op-ed, emphasise that they are scholars, not faith-based economists. They learn from errors and seek to advance science, but cannot prevent others from using their work to support political causes.

[W]e view ourselves as scholars, though obviously given the prominence of book [sic], and the extraordinary circumstances of the financial crisis, politicians will of course try to use our results to advance their cause. We have never advised Mr. Ryan, nor have we worked for President Obama, whose Council of Economic Advisers drew heavily on our work in a chapter of the 2012 Economic Report of the President, recreating and extending the results.

In the campaign, we received great heat from the right for allowing our work to be used by others as a rationalization for the country’s slow recovery from the financial crisis. Now we are being attacked by the left — primarily by those who have a view that the risks of higher public debt should not be part of the policy conversation. Above all, we resent the attempt to impugn our academic integrity. Doing archival research involves making constant judgments and yes, on occasion, mistakes. Learning from them is how science advances. We hope that we and others can learn from ours.

Greg Mankiw has posted five observations “on the coding error found in one of the Reinhart-Rogoff papers”. The most important, in my opinion, is #3:

I believe that high levels of debt and deficits are a negative for the economy in the long run. My views on this issue have not changed substantially since I wrote about it with Larry Ball almost twenty years ago.

Harvard professor Greg Mankiw is author of a best-selling economic principles text. He apparently believes that high debt eventually causes low growth. I wonder how he defines “high”, since he “never thought there was a magic threshold for the debt-to-GDP ratio above which all hell breaks loose”.

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Early in his Congressional career, Paul D. Ryan, the Wisconsin representative and presumptive Republican vice-presidential nominee, would give out copies of Ayn Rand’s book “Atlas Shrugged” as Christmas presents. He described the novelist of heroic capitalism as “the reason I got into public service.” But what would Rand think of Mr. Ryan?

While Rand, an atheist, did enjoy a good Christmas celebration for its cheerful commercialism, she would have scoffed at the idea of public service. And though Mr. Ryan’s advocacy of steep cuts in government spending would have pleased her, she would have vehemently opposed his social conservatism and hawkish foreign policy. She would have denounced Mr. Ryan as she denounced Ronald Reagan, for trying “to take us back to the Middle Ages, via the unconstitutional union of religion and politics.” ….

Years before Roe v. Wade, Rand called abortion “a moral right which should be left to the sole discretion of the woman involved.” She condemned the military draft and American involvement in Vietnam. She warned against recreational drugs but thought government had no right to ban them. These aspects of Rand do not fit with a political view that weds fiscal and social conservatism.

Stanford historian Jennifer Burns is author of Goddess of the Market: Ayn Rand and the American Right (Oxford University Press, 2009), an intellectual biography based on exclusive access to Rand’s unedited letters and journals.

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